Applied Economics Example:

Second Semi Notes • 2022-2023

#1
Country Wine Coffee
.·:*¨༺ ECONOMICS ༻¨*:·.
ABC 9 3
This came from the greek words oikos =
household and nomus = management; XYZ 8 2
oikanomia which means household
management. Wine Comparison
ABC = 3/9 = 0.33
Social Science XYZ = 2/8 = 0.25
- It deals with the study of man’s life and Thus, XYZ has the comparative
how we live with each other. advantage.
- People and society
Coffee Comparison
ABC = 9/3 = 3
Applied Science
XYZ = 8/2 = 4
- It consists of learning how choices Thus, ABC has the comparative
affect individuals’ decision-making and advantage.
the availability of factors that aid
decision workers craft sound judgment.
#2

Concepts of Studying Economics: Country Rice Corn

PH 9 3
A. Problems of Scarcity
TH 8 2

Rice Comparison
PH = 75/150 = 0.5
TH = 200/300 = 0.66
B. Economics Thus, PH has the comparative
advantage.

Corn Comparison
PH = 150/75 = 2
TH = 300/200 = 1.5
Thus, TH has the comparative
advantage.
Opportunity Cost and Comparative Advantage
Opportunity Cost .·:*¨༺ ORIGIN OF ECONOMICS ༻¨*:·.
- It is the benefit you give up because
you take one action in favor of another.
17th Century
Comparative Advantage - The emergence of Capitalism
- Having a lower opportunity cost and
specialization. 18th Century
- The advent of the Industrial Revolution

Urbanization - highly modernized; rural to

urban

sevdiors : AY ‘22-’23
Adam Smith, a British Economist, articulated managing inflation, regulating foreign
the free-market movement; in his book “An exchange rates, and influencing
Inquiry into Nature and Causes of the Wealth of government bonds trade.
2. Fiscal Policy
Nations.”
- Refers to the implementation of
- He also coined the phrase “invisible
government expenditure and tax
hand” to explain how the pursuit of programs by the appropriate
selfish interests would cause markets to government agencies to influence
adjust. economic conditions such as demand
- Father of Economics; Father of for goods and services, employment
Capitalism generation, and more.

1722-1790 period saw the birth of Marxism.

Microeconomics
- Karl Marx is the Father of Communism. - Represents the study of how individuals
and firms make choices on how to best
John Maynard Keynes (1883-1946) use available resources.
- Increase government expenditures and - Theory of Adam SMith
lower taxes to stimulate market activity - Consumers; individuals
- Supply and demand
and bail out the economy from
- Basic principles of the microeconomics
depression.
is “the consumer theory” and “producer
theory”
Great Depression - it was a worldwide economic
downturn that started in the United States in
1929 and soon spread to the rest of the
industrialized western nations. Also, this
happened because of the management.

Milton Friedman (1912-2006)

- Monetary Policy - Control the money
supply as it affects the inflation and
interest rates.

.·:*¨༺ BRANCHES OF ECONOMICS ༻¨*:·.

Division of Economics
Macroeconomics
1. Productions
- Deals with the structure, behavior, and 2. Distribution
performance of an economy as a whole. 3. Exchange - external
It studies aggregated indicators such as 4. Consumption
gross domestic product (GDP), 5. Public Finance - internal
unemployment, inflation, foreign
exchange, and trade balance. Fundamental Division of Economics
Two Main Macroeconomics Policies 1. Production
2. Distribution
1. Monetary Policy
3. Consumption
- Usually enforced by the central bank to
control interest rates and money supply 4M’s
in an economy. This is to achieve
1. Machine
macroeconomic objectives such as
sevdiors : AY ‘22-’23
 2. Method - Classification is based on how much
3. Materials government intervention there is
4. Manpower - Industries are owned by the
government such as the media,
electricity, telecom, etc.
Factors of Production
1. Land - material
2. Labor - manpower
3. Capital - money
4. Entrepreneurship - method
5. Foreign Exchange

Economic Analysis
Economic Analysis
- A study of economic systems, a
production process, or an industry. This
determines whether something is
operating effectively.

.·:*¨༺ ECONOMIC SYSTEMS ༻¨*:·.

It is a means by which societies or governments
organize…
★ What goods and services should be
produced?
★ How should these goods and services
be produced?
★ Who consumes these goods and
services?

Types of Economic Systems

1. Pure Market Economy (Capitalism)
- Pure no government involvement in
economic decisions
- Private firms account

2. Pure Command Economy (Communism)

- All resources are government-owned
- The government runs all businesses
- One person or a group of officials
decided what products are needed

3. Traditional Economy
- Shaped largely by custom or religion
- Customs and religion determine the
who, what, and how
- People grow and make things the same
way their ancestors did

4. Mixed Economy (Socialism)

sevdiors : AY ‘22-’23